To expand production, Secosen is developing relationships with farmers by offering them 20% above market price. Ultimately, it aims to expand land under production by making loans to farmers so they can buy inputs and land so they in turn can cultivate more land not currently in use. They, in turn, will keep one-third of the rice they grow for family consumption, sell one-third to the company (thereby substantially increasing household income), and use the other third to pay back loans.
Milder acknowledges that when it comes to applying Root Capital's highly successful model to local supply chains in Africa, the risk profile changes dramatically. It's not just the added risks involving production and currency--even management. There is also more risk in terms of getting paid. "There is no way we can do due diligence [on the buyers] like we can on a Starbucks," he says.
A former investment banker, Ellie Winninghoff is a writer and consultant. More of her stories about impact investing are at her blog, DoGoodCapitalist.com. She can be contacted at: ellie.winninghoff (at) gmail (dot) com.